Patrick's latest budget climbs 6.9%

Thursday

Jan 24, 2013 at 6:00 AMJan 24, 2013 at 2:56 PM

By John J. Monahan TELEGRAM & GAZETTE STAFF

Gov. Deval L. Patrick Wednesday laid out plans to spend $1.9 billion in new revenue that would come from his proposals for higher income and lower sales taxes, putting out a $34.8 billion budget for fiscal 2014 — a 6.9 percent hike.

The plan would increase spending for transportation, early education and college assistance.

Explaining his tax and budget plans at the Statehouse, Mr. Patrick said the proposed increase in the income tax from 5.25 to 6.25 percent cannot be separated from his call to cut the sales tax from 6.25 to 4.5 percent.

“The whole budget hangs on the pieces holding together,” Mr. Patrick said, emphasizing that his spending plan also calls for a $226 million increase in Chapter 70 state aid to public schools equal to $25 per student and a proposed $31 million increase in unrestricted local aid to the state's 351 cities and towns.

In addition, the governor's budget proposal calls for a major increase in state funding for preschool programs that would bring spending to $131 million next year. The funds would eliminate long waiting lists for early education programs for children younger than 5 and expand other support services.

Other highlights: A $40 million cap on state film tax credits; level funding of library funds; expanding the sales tax to cover soda and candy; and a $1 increase in the tax on cigarettes from $2.51 to $3.51.

Mr. Patrick said because early reading ability is a critical factor for academic and future economic success for students, it is one of the best ways to spend public money. “This is high-impact dollars, particularly for low-income kids,” Mr. Patrick said.

The governor argued that his proposed tax changes would allow job-producing long-term investments in transportation and education.

“This is a plan to grow jobs,” he said.

He asserted the plan would produce a “fairer, simpler tax code” that would be “less burdensome on poor- and moderate-income wage earners.”

The business community remained skeptical about the short term impact of Mr. Patrick's budget at a time of a weak economy.

Michael J. Widmer, president of the Massachusetts Taxpayers Foundation, said the impact on the economy will depend on the final package of tax changes that clear the Legislature later this year.

“This would produce the highest personal income tax burden in the country,” in addition to enacting major changes in the tax code, Mr. Widmer said.

Besides doubling the personal exemption, he said it would eliminate 44 other exemptions, and impose an estimated $50 million in additional taxes on businesses.

“The scale is extraordinarily large and at a very difficult time for many individuals, and as well obviously a fragile economic recovery,” he said.

Noah Berger, president of the Massachusetts Budget and Policy Center, which advocates for low- and middle-income families, said the governor's tax plan would still leave Massachusetts as a mid-range state in terms of the overall tax burden.

“Overall we are in the middle of the pack, when you add together income tax, sales tax and property tax,” he said.

State aid to public schools would reach $4.39 billion and, combined with the $31 million increase in unrestricted municipal aid, local aid would account for 14.6 percent of the state budget, under the governor' spending plan. Lt. Gov. Timothy P. Murray said the budget would provide the first increase in unrestricted aid to cities and towns in four years. He said it builds on a series of reforms advanced by the administration to cut costs for cities and towns, while also providing a $100 million increase in Chapter 90 funds for local road improvements and $40 million in increased state funding for regional transit systems.

State Rep. James J. O'Day, D-West Boylston, who has sought to raise income taxes for the past two years to provide more funds for education and needy families, said a higher income tax rate with exemptions that protect lower income earners from steep hikes, is less regressive than the sales tax.

“I've been talking about the need for revenue now for more than two years. There are vulnerable people in our communities, who for one reason or another, need additional help. I know we can't help everyone, but we have to work hard to help those who really need it,” Mr. O'Day said.

Moreover, he said, it is hard to argue against the merits of an expansion of early education programs as proposed by the governor.

“When do you want to pay for it? Do you want to pay for it now or do you want to pay for it when we don't educate our 2- and 3-year-olds and we don't really allow their brains to develop the way they are supposed to,” Mr. O'Day said.

“If we don't pay for it now we will pay for it when they are 20, when we didn't do a great job educating them and they end up going into jails or not completing four years of high school. What is the bigger price to pay?” Mr. O'Day asked. “Given the needs of our communities, I think everybody is going to have to feel a little pain.”

On the other side of the partisan aisle, state Rep. Paul K. Frost, R-Auburn, said he believes it is the wrong time to raise taxes. He was on the House floor Wednesday arguing unsuccessfully to change House rules to require a two-thirds vote to raise taxes in the future, instead of the simple majority as required now.

Besides the income tax hike, he noted that the governor also is seeking to raise the cigarette tax and add new taxes to soda and candy. “I'm really afraid we are going to hurt our economic recovery. We are going to hurt job creation in Massachusetts for the sake of trying to raise taxes to spend more,” Mr. Frost said.

“There are lots of good ideas to spend money on and there have been times over my 16 going on 17 years in this chamber I have voted to increase spending on education or transportation and local aid,” Mr. Frost said. “But I think to go for as much as he is going for or for as much of a tax increase that he wants is going to be a mistake and I think it will hurt our economy,” he said.